What Is an AM Best Rating?
An AM Best Financial Strength Rating is its opinion about a named insurer’s ability to meet policy obligations; issuer credit ratings and other assessments answer different questions. Check the insurer on your quote: a carrier rating does not grade the broker or guarantee payment of a specific claim.
How Do AM Best’s Two Rating Types Differ?
A letter grade on a carrier website is easy to treat as a general quality score. AM Best's Financial Strength Rating is narrower. It is the agency's view of whether a particular insurance company can keep meeting the obligations in the policies and contracts that company has written.1
That view belongs to the legal entity AM Best named. It does not automatically apply to a trade name, a broker, a program administrator, or another company in the same corporate family.1,4
AM Best also publishes issuer credit ratings. Those ask whether an entity can meet its financial obligations more generally, including senior obligations on the long-term scale. Insurers can carry both kinds of ratings. Holding companies and some special-purpose issuers can receive an issuer credit rating even when a policyholder's question is the operating insurer's financial-strength rating. The two scales are not interchangeable.2,3
What Are AM Best Outlooks?
A Positive, Negative, or Stable outlook sits beside a rating and signals the direction AM Best thinks is more likely over about three years. A Positive or Negative outlook does not lock in a change, and a Stable outlook does not rule one out. Short-term ratings do not carry outlooks. An under-review mark is a nearer-term alert after a recent event; it is not the same as an outlook.3
If AM Best shows a group, pooled, or reinsured affiliation on a financial-strength rating, it is reading that insurer together with affiliates rather than as a stand-alone name on a brochure.3
What Does a Financial Size Category Show?
Separately, AM Best assigns insurers that already have a letter rating a Financial Size Category, written as a Roman numeral from I (smallest) to XV (largest). That label is meant to show relative size. It is not part of the credit rating and does not have to appear next to the letter grade.4
A larger size category is not a higher financial-strength rating, and it is not AM Best's opinion that the insurer can meet its policy obligations. Size and ability to pay are different facts.4,1
What Do AM Best Rating Labels Not Mean?
AM Best does not attach a financial-strength rating to a specific policy. The rating does not grade how the company handles claims, whether it may contest a claim, or whether a given contract is a good fit. It is not advice to buy, keep, or drop coverage. Because the opinion is forward-looking, AM Best may change, suspend, or withdraw it; it is not a guarantee against later weakness.1
An issuer credit rating likewise is not a recommendation to buy or sell securities and does not speak to risks other than credit.2
Separately from a carrier financial-strength rating, AM Best publishes a Performance Assessment for delegated underwriting authority enterprises, including managing general agents. That assessment is not a credit rating and does not address creditworthiness.4
What Should You Confirm About an AM Best Rating?
If a quote or marketing page mentions AM Best, check the legal entity actually rated, whether the label is a financial-strength rating or an issuer credit rating, any outlook or under-review status, and the current record on AM Best's site.1,3,4
A parent, partner, fronting carrier, or reinsurer grade is not automatically the grade of the brand selling the policy or of the managing general agent that placed it. A company webpage is not a substitute for AM Best's current rated-entity record.4,1
